Wednesday, January 02, 2013

The Senate-White House compromise grudgingly passed by the House is a
Beltway classic: The biggest tax increase in 20 years in return for
spending increases, and all spun for political purposes as a
"tax cut for the middle class." But taxes on the middle class were only
going up on January 1 because the politicians had set it up that way,
manufacturing a fake crisis. The politicians now portray themselves as
scrambling heroically to save the day by sparing the middle class while
raising taxes on small business, investors and the affluent.

So much for change.

Meanwhile, even as Democrats claim these tax rates won't matter to
investment, Senators stuffed their bill full of tax subsidies for
special business interests. The wind tax credit survived (cost: $12.1
billion), and so did the tax breaks for cellulosic ethanol ($59 million)
and the impoverished producers of Hollywood ($248 million).

Mr. Obama said on New Year's Eve that he wants to pursue "tax reform"
this year, but the Senate-White House bill is a walking repudiation of
the concept.

According to the Congressional Budget Office, the last-minute fiscal cliff deal reached by congressional leaders and President Barack Obama cuts only $15 billion in spending while increasing tax revenues by $620 billion—a 41:1 ratio of tax increases to spending cuts.

When Presidents Ronald Reagan and George H.W. Bush increased taxes in return for spending cuts—cuts that never ultimately came—they did so at ratios of 1:3 and 1:2.

The fiscal deal struck last night makes one thing clear: President Obama
must have really hated the recommendations of the bipartisan
Bowles-Simpson commission that he appointed. The commission said that we
needed to reform entitlement programs to rein in spending and that
increased tax revenue should come in the form of base broadening and
lower marginal tax rates. The deal appears to offer no entitlement
reforms, no tax reform, and higher marginal tax rates. After all the
public discussion over the past couple years of what a good fiscal
reform would like like, it is hard to imagine a deal that would be less
responsive to the ideas of bipartisan policy wonks.

The Weekly Standard's William Kristol called the deal "ridiculous in too many ways to count" and "a sad commentary on our politics today" but urged Republicans to say yes to the mess,

On the other hand, the deal is substantively better than going over the
cliff and having all income and investment taxes go up, and having the
defense sequester hit right away. And politically, Republicans are
escaping with a better outcome than they might have expected, and
President Obama has gotten relatively little at his moment of greatest
strength. In particular, this should do it for new tax revenues, at a
number lower than Speaker Boehner originally offered—and it should be
pretty easy to have the next debate focus on spending and entitlements.

that we just need to increase taxes on the “wealthy,” restoring them to
Clinton-era rates, and then everything will be fine. He has never
offered any other plan either to raise revenue, or to control spending.
Raising taxes on upper-income taxpayers is the only card in his deck.

When this inevitably fails to make a dent in the deficit the public will notice.

At some point, perhaps sooner rather than later, interest rates will
begin to rise, at which point the debt issue will become a crisis. And
Republicans will say: we told you so.

The Democrats will have only three choices: they can try to raise
taxes on the “rich” even higher. But raising them to 100% wouldn’t deal
with the deficit, even if you assume all those rich people are willing
to work for free. The second option is to restrain federal spending. The
Democrats would rather die than do that. The third option is to try to
raise taxes on all those millions of Americans who aren’t rich. That is
what the Democrats will do once the moment arrives when they can no
longer ignore the trillions of dollars in debt they are inflicting on
our children. That will be, politically, a very bad moment for the
Democrats and a very good one for the Republicans, who can offer the
alternative of less spending and who will have been proved right with
respect to the biggest policy debate of recent years.

All of this is another way of saying that, with
the Democrats’ BS about raising taxes on the rich out of the way, we
can have a rational debate about the country’s fiscal future.

Or maybe the Democrats and the media will try to blame this on the tax increases only affecting those above $450k per year rather than the $250k per year the President wanted.

As far as Nevada's delegation, both Senators, Republican Dean Heller and Democrat Harry Reid voted for the bill. In the House, Democrat Shelley Berkley voted for it. Both of the state's House Republicans issued press releases explaining their votes.

"At midnight last night taxes increased for every American
individual, family, and small business. Tonight, the House has passed
legislation to permanently lower rates for 98% of Americans while also
providing certainty to family-owned businesses by permanently locking in
the rates for the estate tax. The bill also protects capital gains and
dividends rates, which will provide seniors on fixed incomes with
financial security. Additionally, this legislation included provisions
important to Nevada that would help ensure seniors’ access to the
physician of their choice, preserve the state and local sales tax
deduction, and extend the Mortgage Debt Relief Act of 2007.

"While I would have preferred to see more spending cuts in this final
package, I did vote for this compromise because ultimately it was more
important to protect Nevada families and businesses from these
unprecedented tax increases.

Mark Amodei was the only member of Nevada's Congressional delegation to vote no.

"I
respectfully decline to support a measure that raises $41 in revenue for
every dollar of spending cuts (Congressional Budget Office). This is
not a balanced approach. The status quo on the federal budget deficit
and federal debt is not acceptable; especially at a time when Nevadans
continue to struggle with the uncertainties of a persistent recession,
the implementation of ObamaCare, and the administration's newly
expressed desire to increase taxes again this year.

"Adding to
the uncertainty misery index for employers and the middle class, is the
appearance there is no end in sight to the anti-business regulatory
onslaught of health, labor, environmental, and land use regulations
pouring out of this administration.

This sets up another battle in a couple of months over the debt ceiling and sequestration, which the fiscal cliff deal merely postponed for 2 months. For those who hoped for more congeniality this session of Congress, or who thought this fight would be the last contentious battle well, too bad. Fasten your seat belts, folks, it's going to be a bumpy ride.

More from Me

Contact Me

Disclosure

The editor of Cranky Hermit, Mike Chamberlain, is a consultant and freelance writer whose clients sometimes include political candidates.

This blog has never accepted advertising or sponsorships. The organizations below have at one time or another compensated or sponsored the editor of Cranky Hermit for doing something other than saying nice things about them on this blog, although we may occasionally say nice things about them anyway.

Nevada Business Coalition

A pro-business, pro-free market grassroots lobbying organization

Nevada News Bureau

An independent, non-partisan news service covering the statehouse and politics in Nevada.

BlogCon

September 9-12, 2010; Washington, DC; Brought to you by FreedomWorks

End of Disclosure Section

Like us on Facebook

Search This Blog

Loading...

The opinions expressed here are entirely those of the author. They do not necessarily represent the views of past, present or future employers, family members, colleagues, friends, acquaintances or anyone else.